ECO2013 Chapter 16 Monetary System

The members of the Federal Reserve's Board of Governors

are appointed by the president of the U.S. and confirmed by the U.S. Senate.

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

buying bonds. This buying would increase the money supply.

Which of the following is a store of value?

cash and stocks.

Which of the following defer payments?

credit cards but not debit cards

An open-market purchase

increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.

If the discount rate is raised then banks borrow

less from the Fed so reserves decrease.

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

members of the Board of Governors but not the regional Federal Reserve Bank Presidents.

Monetary policy affects employment

only in the short run.

On a bank's T-account, which are part of the bank's assets?

reserves but not deposits made by its customers.

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

reserves increase by $100 million and the money supply increases by more than $100 million.

According to the article "Why Gold?', silver may be used as money. One problem with using silver as money is that

silver tarnishes over time.

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000.

Bank capital is

the resources that owners have put into the bank.

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

$75,000.

If the reserve ratio is 10 percent, the money multiplier is

10.

Table 29-6. Bank of Pleasantville Assets Liabilities Reserves $3,000 Deposits $50,000 Loans 47,000 Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

16.7

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-2. Suppose that the Bank of Tazi changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after banks adjust to the change in the reserve requirement?

9,375 million tazes

Consider five high school students working on homework in study hall. Rosie has math homework wants science homework Bob has English homework wants history homework Piper has math homework wants science homework Dewey has science homework wants English homework Molly has science homework wants math homework Which of the following pairs of students has a double coincidence of wants?

Piper and Molly

Which of the following is not a central bank?

The Bank of America

Which of the following is an example of commodity money?

The gold standard